Economics 100% cheatsheet flashcards

How does the market clear a shortage?

Prices rise, encouraging more supply and reducing demand until equilibrium is restored.

How does the market clear a surplus?

Prices fall, increasing demand and reducing supply until equilibrium is restored.

What causes a supply curve to shift right?

Lower production costs, improved technology, subsidies, or more producers.

What causes positive externalities?

Benefits to third parties from economic activity, such as education or vaccinations.

What are the four components of GDP?

Consumption, Investment, Government Spending, and Net Exports.

What is economic growth?

An increase in the production of goods and services over time.

What causes economic growth?

Increased investment, productivity, technology, skills, or resources.

What is one benefit of economic growth?

Higher incomes and improved living standards.

What is one cost of economic growth?

Environmental damage or resource depletion.

What does the expansion phase of the business cycle look like?

Rising GDP, employment, investment and confidence.

What does the contraction phase of the business cycle look like?

Falling GDP, lower investment, rising unemployment and reduced confidence.

What is CPI?

The Consumer Price Index, a measure of changes in the average price level of goods and services.

What is inflation?

A sustained increase in the general price level of goods and services.

What causes demand-pull inflation?

Demand for goods and services grows faster than aggregate supply.

What causes cost-push inflation?

Rising production costs cause businesses to increase prices.

How is the unemployment rate calculated?

Unemployed people ÷ labour force × 100.

What is cyclical unemployment?

Unemployment caused by economic downturns.

What is frictional unemployment?

Short-term unemployment while people move between jobs.

What is structural unemployment?

Unemployment caused by a mismatch between workers' skills and available jobs.

How is Real GDP calculated?

Real GDP = Nominal GDP/GDP Deflator